Monday, August 16, 2010

Government Failed to Prove That Defendant Used "Counterfeit Mark" on Containers of Allegedly Counterfeit Drugs

You may not find yourself handling many counterfeit drug cases, but there's still a broader lesson to be learned from Xu: even if there's a simple, straightforward way for the Government to establish an easily provable element of an offense, the Government can still screw it up. So keep on your toes.

Xu was convicted at trial of several counts involving counterfeit drugs. He appealed his conviction on one count of trafficking in counterfeit goods, specifically Zyprexa. One element of that offense, 18 U.S.C. § 2320, is that "the defendant used a counterfeit mark." And "[u]nder the statute, a 'counterfeit mark' must be 'identical with, or substantially indistinguishable from, a mark registered on the principal register in the United States Patent and Trademark Office ['USPTO'] and in use.'"

Typically, the Government will prove that element with a certified copy of the certificate of registration. For whatever reason, the Government did not do that here. What did it offer? "[A] number of exhibits of the allegedly conterfeit Zyprexa, but not samples of the original, authentic drug from which a jury could infer trademark registration."

The Government also offered the testimony of an employee of Zyprexa's manufacturer, who tested samples of the allegedly counterfeit Zyprexa. "Although the employee referred to the Zyprexa as 'counterfeit' and explained how the samples obtained from Xu differed from the drug produced by Eli Lilly, he never stated that Zyprexa was a mark registered on the USPTO’s principal register, as required to meet the definition of 'counterfeit' under 18 U.S.C. § 2320(e)(1)(A)(ii)."

The employee also testified that "the 'little symbol that's next to Zyprexa' on one of the allegedly counterfeit containers of the medication" was "the 'registered trademark symbol.'" Not good enough, for two reasons. First, there was no evidence that the same mark appeared on genuine containers of Zyprexa. Second, there is more than one trademark registry, and the employee's reference to the "registered" symbol "did nothing to establish that the mark was listed on the principal register, as opposed to being registered in some other manner."

Finally, testimony "that the potency of each Zyprexa tablet is a 'registered commitment'" failed to carry the day, because did not "show that a 'registered commitment' has anything to do with registration on the USPTO's principal register, as aopposed to simply some form of FDA requirement[.]"

Thus, the evidence was insufficient to support Xu's conviction on that count, and the court vacated it.